Energia
Saudi Arabia's Electricity Sector Undergoes Largest, Most Comprehensive Transformation On A Global Scale
RIYADH, Saudi Arabia , Nov. 17 , 2020 /PRNewswire/ -- A press conference was held on Monday 16 November 2020 , organized by Saudi Arabia's Ministry of Energy, to announce sweeping electricity sector reforms that will ensure the long-term health and sustainability of the electricity sector and the achievements of the Kingdom's goal under Vision 2030.
These reforms are considered a crucial steppingstone in achieving the Ministry of Energy goals for the electricity sector which are in line with the goals of Vision 2030, and include the following:
The comprehensive reform package of measures includes the establishment of a revenue requirement mechanism for sector service providers and a tariff balancing account to compensate for the difference between the efficient cost to serve and the income from tariffs.
For Saudi Electricity Co. specifically the reforms mark the entry of the Company into a regulatory framework with clear rights and obligations. In return the Company will have the right to receive a fair rate of return of 6% (WACC) on its regulated asset base and fully recover its efficient cost-to-serve as determined by the regulator, Electricity and Cogeneration Regulatory Authority (ECRA). Importantly the Company will operate under a predictable, transparent, and stable regulatory framework with clear arm's length commercial relations amongst sector players and participants. The reforms also include the cancellation of government fees the Company had been paying and the reconciliation of the Company's net legacy Government liabilities, and the restructuring of its balance sheet.
The magnitude of the reform is a momentous landmark on multiple fronts, it is the:
Forward-looking statements are based upon reasonable assumptions, there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. HSBC undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change except as required by applicable securities regulations. HSBC acted as financial advisor to SEC.
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